Water in crisis – searching for solutions
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Water in crisis – searching for solutions

The world is facing a water crisis. Around the globe we either have too little (drought), too much (flooding) or too toxic water.

Climate change, alongside other factors, are placing our access to clean, safe water under threat.  And it’s a crisis that looks set to worsen.  Per a 2023 water risk report, 25% of the world’s population currently face extremely high water stress each year, regularly using up almost their entire available water supply.  And at least 50% of the world’s population, around 4 billion people, are currently living under highly water-stressed conditions for at least one month of the year1.

These are worrying figures, but sometimes it’s hard to grasp the seriousness of the problem until you’re physically presented with it.  That’s exactly what happened on a holiday to Spain’s Andalusia region in February this year.  On a hike inland we encountered Malaga’s El Chorro Reservoir, which was more of a muddy puddle.  Standing at less than 17% full – the lowest level on record – it was way below the 60% level you’d expect at that time of year.  Southern Spain is in a multi-year drought with increasing restrictions on water use and growing fears of what that could mean for the summer tourism season. 

Chorro's quote

But Spain is not alone with record global temperatures in 20232 exacerbating multi-year droughts across South America, Africa and elsewhere in the Mediterranean.  Flooding has also become more prevalent as rising ocean temperatures bring more intensive storms.

The impact of climate change is compounded by growing populations and rapid rates of urbanisation which place further strain on our water infrastructure.  This also follows decades of insufficient government investment into water networks.  It is estimated that about 30% of water in global water systems is lost through ageing infrastructure and wasteful water practices, enough to provide water to an additional 2 billion people!3

And the economic costs of depleted access to quality water are immediate with water a critical input for many industries.  Agriculture accounts for around 70% of global water use whilst water helps to power 15% of the world’s electricity generation through hydropower4.  But water also plays a key role in the construction of buildings, the mining and refining of resources and in technology sectors from the manufacturing of the semiconductors used in our electronics to the cooling of the datacentres used to power the internet.  With clean water increasingly scarce, it’s clear that both public and private enterprises need to invest in solutions that promote greater water circularity.  Recycling and reuse need to become the norm and at Columbia Threadneedle Investments we actively engage with companies on this topic given its importance from environmental and financial perspectives.

But water scarcity is not the only problem – there are also real issues around the quality of water, for example in 2023, only 14% of UK rivers were deemed to be of ‘good’ ecological status5.  Per – and polyflourinated alkyl substances (PFAS) are used in a multitude of manufacturing processes and products including plastic packaging.  When released into water these ‘forever chemicals’ won’t break down for thousands of years and have been linked with a host of negative biodiversity and health impacts.  Dubbed the ‘new asbestos’, governments around the world are starting to introduce stricter regulation around the cleaning up of PFAS in our drinking water with the scope for related litigation and cleanup costs huge for those companies not adhering.

Governments and enterprises are now waking up to the increased economic risks from water stress, at a time where political pressure is growing for them to address the water crisis.  Many countries are now accelerating water investment as a result.  For example, as part of President Biden’s 2021 $1 trillion infrastructure spending bill, $55 billion was earmarked to upgrade America’s ageing water infrastructure, at a time when droughts and flooding are becoming more frequent and severe across the country6.

We believe companies providing innovative solutions to promote better water management are not only delivering positive sustainable outcomes but are also well positioned to enjoy tailwinds to their growth from increased public and private investment into water infrastructure and solutions. We see sustainable water management as a key theme and we are invested in several companies positively exposed to this theme, including:

  • Xylem, the world’s largest water flow and treatment company. In 2022, they bought Evoqua, thereby enhancing their treatment capabilities – including the ability to decontaminate water from PFAS chemicals. 
  • Advanced Drainage Systems, a leading provider of stormwater and wastewater management systems in the US. With the frequency and severity of storms increasing across the US because of climate change, states are having to upgrade their stormwater infrastructure to lower the risk of flooding. 
  • Tetra Tech, a water consulting company that supports clients in all aspects of water management including water resilience and access to clean, safe water. Increased regulations around PFAS are expected to double sales for their PFAS consulting business this year.  They recently announced a $464 million contract with the US Department of Defence that includes tackling PFAS chemicals as well as a £100milliion project from a UK water utility company to help improve river health across the North-West of England. 
  • Ecolab, a business services company delivering water solutions which enable its customers, across multiple sectors, to both recycle water and increase water- efficiency. In 2023, we visited Barclays’ cooling tower in London’s Canary Wharf where Ecolab’s “Nalco” water solutions are used to keep the air-cooling systems free of water borne pathogens (making the building healthy for its occupants) and promote better water efficiency.

 

Mention of specific stocks is not a recommendation to deal.

Nalco's quote

Water is arguably the most underappreciated resource in the world today – we pay very little for it but the impact to both our lives and our environment when we lack access to clean, safe water are immeasurable. Fortunately, it appears the world is starting to realise this and invest to preserve this treasured resource. 

21 May 2024
Pauline Grange
Pauline Grange
Portfolio Manager, Global Equities
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Water in crisis – searching for solutions

1https://www.wri.org/insights/highest-water-stressed-countries#:~:text=And%20at%20least%2050%25%20of,one%20month%20of%20the%20year

2World Meteorological Organization, January 2023

3Global Water intelligence report, May 2021

4Our World in Data, February 2024

5UK government ‘State of the water environment indicator’, May 2023

6The White House, November 2021

Important information

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). For marketing purposes.

 

This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.

 

In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414. TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth) and relies on Class Order 03/1102 in respect of the financial services it provides to wholesale clients in Australia. This document should only be distributed in Australia to “wholesale clients” as defined in Section 761G of the Corporations Act. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.

 

In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.

 

In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.

 

In Japan: Issued by Columbia Threadneedle Investments Japan Co., Ltd. Financial Instruments Business Operator, The Director-General of Kanto Local Finance Bureau (FIBO) No.3281, and a member of Japan Investment Advisers Association and Type II Financial Instruments Firms Association.

 

In the UK: Issued by Threadneedle Asset Management Limited, No. 573204 and/or Columbia Threadneedle Management Limited, No. 517895, both registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.

 

In the EEA: Issued by Threadneedle Management Luxembourg S.A., registered with the Registre de Commerce et des Sociétés (Luxembourg), No. B 110242 and/or Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.

 

In Switzerland: Issued by Threadneedle Portfolio Services AG, an unregulated Swiss firm or Columbia Threadneedle Management (Swiss) GmbH, acting as representative office of Columbia Threadneedle Management Limited, authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA).

 

In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA). For Distributors: This document is intended to provide distributors with information about Group products and services and is not for further distribution. For Institutional Clients: The information in this document is not intended as financial
advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.

 

This document may be made available to you by an affiliated company which is part of the Columbia Threadneedle Investments group of companies: Columbia Threadneedle Management Limited in the UK; Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.

 

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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Important information

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). For marketing purposes.

 

This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.

 

In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414. TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth) and relies on Class Order 03/1102 in respect of the financial services it provides to wholesale clients in Australia. This document should only be distributed in Australia to “wholesale clients” as defined in Section 761G of the Corporations Act. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.

 

In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.

 

In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.

 

In Japan: Issued by Columbia Threadneedle Investments Japan Co., Ltd. Financial Instruments Business Operator, The Director-General of Kanto Local Finance Bureau (FIBO) No.3281, and a member of Japan Investment Advisers Association and Type II Financial Instruments Firms Association.

 

In the UK: Issued by Threadneedle Asset Management Limited, No. 573204 and/or Columbia Threadneedle Management Limited, No. 517895, both registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.

 

In the EEA: Issued by Threadneedle Management Luxembourg S.A., registered with the Registre de Commerce et des Sociétés (Luxembourg), No. B 110242 and/or Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.

 

In Switzerland: Issued by Threadneedle Portfolio Services AG, an unregulated Swiss firm or Columbia Threadneedle Management (Swiss) GmbH, acting as representative office of Columbia Threadneedle Management Limited, authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA).

 

In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA). For Distributors: This document is intended to provide distributors with information about Group products and services and is not for further distribution. For Institutional Clients: The information in this document is not intended as financial
advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.

 

This document may be made available to you by an affiliated company which is part of the Columbia Threadneedle Investments group of companies: Columbia Threadneedle Management Limited in the UK; Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.

 

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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